Marine Insurance 2001 - The Year in Review

Marine Insurance 2001 - The Year in Review

Originally published in January 2002

1. INTRODUCTION

In this review we report on legal and market developments in 2001 likely to be of interest to marine insurers. As well as developments relevant to specific sections of the market, there were also developments of general application, of which the "BEURSGRACHT", the first judgment we consider, is a prime example.

2. CONTENTS

Case Law

1. "BEURSGRACHT"

   - late declaration under Open Cover

2. "DELPHINE"

   - yacht - accident or arson?

3. "MARKOS N"

   - cargo recovery - time bar

4. "MERCANDIAN CONTINENT"

   - utmost good faith post contract

5. "MOANA"

   - yacht - "unexplained" total loss

6. "PALAQUIN"

   - "Star Sea" applied

7. Perks v HM Inspector of Taxes

   - what is a ship?

8. Piper Alpha

   - legal battle draws to a close - subrogation

9. "STAR SEA"

   - hull - privity of the assured - utmost good faith

10. "STARSIN"

    - cargo recovery - identity of carrier clauses

11. "VERGINA"

    - hull - salvage - burden of proof

    Legislative/market developments

    Corporate killing

    ISM Code - Phase 2

    Limitation of liability changes

    Terrorism wording - cargo

    3. CASE LAW

    3.1 "BEURSGRACHT"

    Glencore International AG v Ryan & others

    Court of Appeal - unreported - 21/12/01

    Charterers' liability - late declaration under Open Cover

    Whilst a charterers' liability dispute, this case has wider ramifications for the operation of Open Covers. Owners sued charterers for an indemnity in respect of damages that the Owners had had to pay out to the family of a stevedore killed during loading operations. Charterers paid Owners.

    Charterers sought to recover those sums from their charterers' liability underwriters. Underwriters defended the claim on the basis that the assured charterers' declaration of the vessel was made more than 5 years after the charter was entered into and the casualty giving rise to liability occurred.

    Having ruled that underwriters were automatically on risk when the vessel was chartered subject to declaration of the vessel, the Court of Appeal had to decide the consequences of the late declaration (found by the trial judge to be a good faith mistake). Were the consequences so serious that, as alleged by underwriters, underwriters were off risk by reason of breach? The Court of Appeal, upholding the trial judge's decision, ruled that in the absence of specific policy language making timely declarations a pre-condition of cover, the late declaration was not so serious as to entitle underwriters to treat themselves as being off risk. They were, therefore, liable to reimburse charterers for the amounts charterers had paid to owners.

    3.2 "DELPHINE"

    Aquarius Financial Enterprises Inc v Lloyd's underwriters

    [2001] 2 Lloyd's Rep p. 542

    Fire on board yacht in harbour

    Hull and machinery - accidental or deliberate loss?

    The vessel, a yacht, caught fire in harbour and became a total loss. She was insured for all risks of physical loss by accidental causes. The assured claimed against his hull underwriters for a total loss. Underwriters denied liability, claiming that the assured had deliberately caused the fire.

    The trial judge decided that the assured had to show, on the balance of probabilities, that the fire was accidental as far as he was concerned, although the assured did not have to show exactly what caused the fire. On the evidence the assured put forward various theories as to how the fire might have started accidentally but these were rejected by the judge, who ruled that they were not credible. The evidence of arson was sufficiently strong for the assured's explanations to be discounted. The assured's claim therefore failed.

    The judge also went on to conclude that there was circumstantial evidence of motive for arson, by reference to the vessel being over-insured, difficult to sell and a source of expenditure rather than income.

    3.3 "MARKOS N"

    Thyssen Inc. v Calypso Shipping

    [2000] 2 Lloyd's Rep p 243

    Cargo recovery - time bar

    Although a decision of 2000, this judgment is not widely known but merits wider attention - it is important in demonstrating the need to protect any applicable time bar.

    Cargo receivers applied to Court for a declaration that their claim against the owners of the carrying ship was not time barred, alternatively for a time extension to commence arbitration proceedings pursuant to Section 12 of the Arbitration Act 1996.

    The bills of lading referred to a charterparty on their face and the reverse of the bills contained a clause incorporating the charterparty (including the Charterparty Arbitration Clause). Cargo interests issued proceedings on March 1997 in Texas. The action was transferred by consent to the Southern District Court of...